The Truth About Credit Cards – Part Two

You’re back for more, huh? Yesterday I covered five lies that people believe about credit card usage. I upset some of you, but that’s okay. It’s hard to quit believing something you’ve believed for years. I totally understand that. I just hope I’ve given you something to think about – something to ponder for future spending. Let’s proceed with five more!

Myth 6: Using credit cards it the only way to build my credit.

Why do you need to build your credit? Do you plan on borrowing more money? If not, then who cares what your credit score is? My goal is to NOT borrow money, so if my credit score was 0, it would be okay. And yes, I know some of you want to know how to get a mortgage without having good credit. Mortgages are one of the few things I don’t have issues with in regards to debt. Homes are a good thing – if you are buying a home within your means. You can get a mortgage without having a credit score. Yes, you heard me. It’s called nontraditional credit, and it happens all the time. Fannie Mae, FHA and VA all deal with this daily. Want to debate the other reasons for having a decent credit score? Check out my responses to those first.

Myth 7: I’m on a 0% APR promotion, so I’m not losing any money.

Remember, these are multi-billion dollar companies. Are they making their billions because you’re playing their system and not giving them any of your money? Nope. The catch with most of these promotions is that if you’re late even once, your interest rate goes to their default (maximum) and you’re also (most of the time) penalized by being charged all the accumulated interest back to the beginning of the agreement. Yikes! That can really add up.

Myth 8: It’s more convenient to carry a credit card.

Is it really? Is it convenient to spend more money? A study was done about spenders at McDonald’s – when they used cash, their purchase averaged $4. But when they used a credit card, they spent roughly $7. Imagine if you had that much of an increase everywhere! In general, studies show you’ll spend about 18% more by using credit. That’s a hefty sum to pay for convenience.

Myth 9: I have to have a credit card to purchase things online or to rent a car.

Is it true that some companies won’t let you use a debit card to rent a car? Yep. Is it also true that you can say “no thanks” and take your businesses to another rental agency? YES. It’s called BUYING POWER. You have the cash, you make the choice. You can search online for a company that accepts debit cards. Ehow has a good article about that.

Myth 10: I can afford this…just not now. I’ll get a check at the end of the month.

Do you wonder how many people have gone down with the ship because of this belief? Wonder how many people bought a BIG SCREEN for the BIG GAME and then lost their job the next week? It happens a lot. You are not immune. If you can afford it at the end of the month with your bonus check then just wait until the end of the month. A few weeks won’t kill you.

Whew – now I know what pastors who preach those harsh sermons feels like. I’m sure I’ve stepped on just about everybody’s toes and a few of you have hateful things you can’t wait to share. But one last thing before you do – just like the pastor who preaches a sermon that steps on everybody’s toes, I’m trying to help. I see too many people who play with snakes and get bitten. Credit cards are dangerous.

Tiffany

Hey Tiffany. On my wife’s site I wrote an article about this a while back. http://www.stacymakescents.com/debt-free-living-do-you-need-a-mortgage It doesn’t go into great detail about how to get a manual underwriter or non-traditional credit methods. Instead it is focused on debt-free living. That said, there are resources that can help you understand and determine if you qualify for a mortgage using non-traditional credit. Churchill Mortgage is one place Dave Ramsey recommends and so I would start there if you need to consider this option for yourself.

Welcome!

Hi! I'm Barry. I'm glad you stopped by and hope you'll enjoy your visit. My goal is to provide practical, real-world solutions to positively impact you where it often matters most – your pocketbook! My approach looks beyond the simple math of personal finance to place the focus on the behavior that drives your financial choices. Follow along and I'll help you get out of debt, save for short- and long-term goals and set good priorities with your money.